SANTA CLARITA VALLEY Quarterly Forecast Update 3nd Quarter | 2012

A Publication of the

Economic Analysis Provided By

Presented By

The 2013 Outlook for California By Mark Schniepp, Ph.D., Executive Director, California Economic ForecastBy Mark Schniepp, Ph.D., Executive Director, California Economic ForecastBy Mark Schniepp, Ph.D., Executive Director, California Economic ForecastBy Mark Schniepp, Ph.D., Executive Director, California Economic Forecast

Quarterly Economic Report | Q3 2012

Page 1 SANTA CLARITA VALLEY

The US and California Economies have strengthened in 2012. Unemployment rates

con�nue to decline, more jobs are being created, incomes are riding along with consumer

spending and business investment, and the housing market is finally in recovery a%er

nearly 5 years of stagna�on.

The UCLA Anderson forecast for the US calls for con�nued gradual improvement in

economic growth in 2013. The unemployment rate will also be in decline during the year.

Job crea�on has remained steady for the last 28 months though it has no�ceably slowed in

2012. Currently, the US labor markets are on a pace that will produce nearly 2 million jobs

during calendar 2012. That pace will accelerate to at least 2.3 million jobs in 2013.

GDP is forecast to grow 2.1 percent in 2012 and 1.8 percent in 2013, accelera�ng to nearly

3 percent in 2014. Unemployment will decline slowly, not falling below 8 percent un�l

2014.

In California, job crea�on in 2012 has been be1er than previously forecast. Nearly 240,000

jobs will be crated this year in the state, largely in technology, visitor-serving, and business

services.

The Bay Area is the leading region in the state for job crea�on, followed by Southern

California. Despite the con�nuing budget problems that persist with the State’s finances,

the California economy is forecast to produce over 220,000 jobs next year.

The employment rate is currently over 10 percent in the State. It is forecast to fall to 9.8

percent in 2013 and 8.5 percent in 2014. Household incomes rise slowly in 2013 but the

forecast of consumer spending remains contained. There will be more retails sales in the

state but the rate of growth is half the 2012 rate.

Quarterly Economic Report | Q3 2012 Page 2

SANTA CLARITA VALLEY

Exports in California remain strong. The value of products shipped from the

Ports of Long Beach, Los Angeles, Hueneme and Oakland are currently at

record levels in 2012. This is helping to drive transporta�on, distribu�on, and

warehousing sectors of the California economy including in these industries.

The Labor Market Recovery

Nearly all California coun�es show rising levels of employment in 2012,

though the pace of job crea�on is slow. By 2013 all principal coun�es are

crea�ng new jobs within even stronger growth observed in 2014.

This generally develops as follows:

• Job growth is now occurring in the larger coun�es in California and

by 2013, nearly all coun�es will be adding to employment.

• A more vibrant labor market expansion is expected in 2013, as many

of the popula�on serving sectors hire to accommodate more people

and visitors in California.

• The job engines of growth in California are (1) technology, (2)

exports, and (3) leisure and hospitality.

• The unemployment rate remains high despite more employment

opportuni�es because the addi�ons to the labor force since 2007

have been much greater than job crea�ons.

Declining unemployment rates will hasten the pace of growth in real (infla�on

adjusted) wages and salaries, and ul�mately total personal income and

consumer spending.

Quarterly Economic Report | Q3 2012 Page 2

SANTA CLARITA VALLEY

The Housing Recovery

The epicenter of the Great Recession of 2008-2009 was real estate including new home

building. Employment in construc�on declined sharply throughout California and the na-

�on. Vacant office buildings today will preclude much new non-residen�al building over

the next year or two. The stock of foreclosed homes however, is being quickly eliminated

by investor purchases, and being occupied by renters. The tepid recovery in housing

speeds up in 2013 and 2014 and this flows through to construc�on employment.

There will be a posi�ve albeit weak rebound during next year in new home produc�on.

This occurs because the inventory of exis�ng housing has declined to levels that necessi-

tate new addi�ons to the housing stock to meet rising demand.

Inventories of for-sale housing are currently at 6 year lows in California. This alone will

accelerate the overall economic expansion in the state and na�on for the remainder of this

year and 2013.

New home building rises in 2013, but does not reach “normal” levels of building un�l 2014

or 2015.

The sum of housing units over the next 5 years is more important than the year-by-year

alloca�on of units. In the short run, the forecast of new housing units is not sufficient to

prevent average household sizes from rising. New housing inventories remain �ght for the

next two years as development ramps up this year.

Residential Real EstateResidential Real EstateResidential Real EstateResidential Real Estate

• In September 2012, the median home selling price in Santa Clarita Valley was

$376,000. This is slightly below the median price that was observed in June and

July, but is 2.5% above the price seen in Sept 2011.

• Homes sales have increased substan�ally from last year. During June-September

2012, sales were up by 12.6% compared with June-Sept 2011

• This mirrors trends that have been observed across the state. Low prices and

interest rates have begun to en�ce buyers back into the market and sales have

increased from primary homebuyers as well as investors.

SANTA CLARITA VALLEY Quarterly Economic Report | Q3 2012

Page 3

Source : DataQuick

Source: First American Core Logic/DataQuick/California Forecast

Lennar Lexington Homes at River Village

SANTA CLARITA VALLEY Quarterly Economic Report | Q3 2012

Page 4

Residential Real EstateResidential Real EstateResidential Real EstateResidential Real Estate

• In the Santa Clarita Valley, there were 161 new home sales during

the first quarter of 2012. This is roughly equal to the number of

homes sold during the first Quarter 2012, but is nearly double the

number compared to Q2 2011 (81 sales).

• During the Q2 2012, new home prices rose on a year-over-year

basis. When compared to Q2 2011, the median price was higher by

2.6%.

• Inventory of unsold new homes con�nued to decrease in Q2. There

were as total of 75 homes in this category, compared to 83 in Q1

2012 and 143 in Q2 2011.

• The current inventory represents 1.4 months of supply. This is the

lowest level since Q2 2009.

Source: The Siracusa Company

SANTA CLARITA VALLEY Quarterly Economic Report | Q3 2012

Page 5

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

• In the City of Santa Clarita, residen�al construc�on remains low.

• From June-August 2012, 27 units were permi1ed. This is higher than

the number of units permi1ed in June-August 2011 (18 units), and is

roughly equal to the same period in 201 (26 units).

• Through September 2012, 66 total permits have been issues. All

have been for single-family homes. While this number is low, it

compares favorably to the first 8 months of 2011, which 47 units

were permi1ed.

Source: Construction Industry Research Board

Archstone breaks ground in April 2012 on their 157Archstone breaks ground in April 2012 on their 157Archstone breaks ground in April 2012 on their 157Archstone breaks ground in April 2012 on their 157----townhome unit project townhome unit project townhome unit project townhome unit project

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SANTA CLARITA VALLEY Quarterly Economic Report | Q3 2012

Page 6

Available! 28945 N. Avenue Williams, 58,394 sq ftAvailable! 28945 N. Avenue Williams, 58,394 sq ftAvailable! 28945 N. Avenue Williams, 58,394 sq ftAvailable! 28945 N. Avenue Williams, 58,394 sq ft Matt Dierckman, CBRE (818) 502Matt Dierckman, CBRE (818) 502Matt Dierckman, CBRE (818) 502Matt Dierckman, CBRE (818) 502----6752 6752 6752 6752

Commercial Real EstateCommercial Real EstateCommercial Real EstateCommercial Real Estate

• On a year-over-year basis, the vacancy rate for industrial space in

Santa Clarita Valley has dropped from 3.6% to 2.7 percent. When

compared to Q2 of 2012 it was virtually flat.

• The office vacancy rate fell from 22.2% to 17.2& over the past year. It

is down substan�ally from the high point in 2010, but is s�ll elevated

by historical standards.

Source: CBRE

Source: CBRE

SANTA CLARITA VALLEY Quarterly Economic Report | Q3 2012

Page 7

EmploymentEmploymentEmploymentEmployment

• During the third quarter of 2012, it is es�mated that total non-farm

employment in the Santa Clarita Valley was characterized by a slight

decline.

• Total non-farm employment fell in July and August, but rose in September.

However, for the en�re quarter, employment was down by 166 jobs.

• Total seasonally adjusted non-farm employment remains 10 percent

below the previous peak. But when compared to September of 2011,

employment has risen by 1.8 percent.

• On an annual average basis, non-farm employment has risen substan�ally

in 2012. When compared to 2011, the labor market is on pace to add

almost 3,600 jobs, represen�ng a growth rate of 4.6 percent. Despite a

high level of vola�lity on a month-to-month basis, the long-term labor

market recovery remains in tact.

• The sectors that have experienced the strongest growth in the past year

include manufacturing (+12.2 percent), accommoda�on and food services

(+8.3 percent), and arts and recrea�on (+7.8 percent).

• Large sectors with the most pronounced job losses have been educa�onal

SummarySummarySummarySummary

• In general, the economic climate in the Santa Clarita Valley improved during the third quarter of 2012.

• The median price for exis�ng homes has increased slightly during 2012, and exis�ng home sales are up markedly. New home prices have in-

creased as well, and during the second quarter of 2012, new home sales were twice as high as the level that prevailed in the second quarter of

2011.

• The increases in prices and sales have been driven by record levels of affordability. Low interest rates have a1racted buyers back into the mar-

ket, and it is now clear that the real estate recovery has begun.

• A large increase in home sales has lead to a sharply falling level of unsold inventory. Inventory declines have occurred in many parts of the state,

indica�ng that the real estate revival is widespread.

• The industrial real estate market con�nues to �ghten, and vacancy rates for industrial space remain near record lows.

• The Santa Clarita Valley job market has made substan�al strides. So far in 2012, the region is on pace to add almost 3,600 jobs when compared

to the annual average employment level for 2011.

Source: Labor Market Informa�on Division/California Forecast

Santa Clarita Valley EconomicSanta Clarita Valley EconomicSanta Clarita Valley EconomicSanta Clarita Valley Economic

Development CorporationDevelopment CorporationDevelopment CorporationDevelopment Corporation Representing the united effort of regional industry and government leaders, the Santa Clarita Valley Economic Development Corporation (SCVEDC) works to provide an integrated approach to attracting, retaining and expanding a diversity of business and industry in the Santa Clarita Valley. Our overarching goals are to support the creation of high-paying jobs for our trained workforce, stimulate economic activity that grows the regional tax base and strategically position the Santa Clarita Valley and its businesses to better compete in the global economy. For more information, please visit SCVEDC.org.

Executive Committee

Don Fleming Don Fleming Don Fleming Don Fleming –––– CoCoCoCo----ChairmanChairmanChairmanChairman Valencia Acura

Calvin Hedman Calvin Hedman Calvin Hedman Calvin Hedman –––– COCOCOCO----ChairmanChairmanChairmanChairman Hedman Partners

Dr. Dianne Van Hook Dr. Dianne Van Hook Dr. Dianne Van Hook Dr. Dianne Van Hook –––– SecretarySecretarySecretarySecretary College of the Canyons

Tim BurkhartTim BurkhartTim BurkhartTim Burkhart Six Flags Magic Mountain

Nate ButcherNate ButcherNate ButcherNate Butcher Real Estate Nate

Greg McWilliamsGreg McWilliamsGreg McWilliamsGreg McWilliams Newhall Land

Ken PulskampKen PulskampKen PulskampKen Pulskamp City of Santa Clarita

Larry RasmussenLarry RasmussenLarry RasmussenLarry Rasmussen Spirit Holding, Inc.

Roger SeaverRoger SeaverRoger SeaverRoger Seaver Henry Mayo Newhall Memorial Hospital

John ShafferyJohn ShafferyJohn ShafferyJohn Shaffery Poole & Shaffery, LLP

Laurel ShockleyLaurel ShockleyLaurel ShockleyLaurel Shockley Southern California Edison

William SloanWilliam SloanWilliam SloanWilliam Sloan California United Bank

Arthur SohikianArthur SohikianArthur SohikianArthur Sohikian AVS Consulting

Rosalind WaymanRosalind WaymanRosalind WaymanRosalind Wayman Supervisor Michael D. Antonovich

Board Members

Chris ChaseChris ChaseChris ChaseChris Chase Triple C Electric Inc. Jon CollardJon CollardJon CollardJon Collard American Tax Incentives Mark DelmarterMark DelmarterMark DelmarterMark Delmarter Klassen Corporation Tim DiTomassoTim DiTomassoTim DiTomassoTim DiTomasso Tomasso Incentive Group Bradford BeanBradford BeanBradford BeanBradford Bean Valencia Country Club Adam GilbertAdam GilbertAdam GilbertAdam Gilbert Disney Corporate Real Estate Armando JamjianArmando JamjianArmando JamjianArmando Jamjian Encore Tax Group Dennis KingDennis KingDennis KingDennis King KKAJ Casey KirkmanCasey KirkmanCasey KirkmanCasey Kirkman AQMS Mayflower Jared KleberJared KleberJared KleberJared Kleber The Enterprise Zone Company Joe MessinaJoe MessinaJoe MessinaJoe Messina Wildcat Business Group Nigel StoutNigel StoutNigel StoutNigel Stout Jones Lang LaSalle Ken WisemanKen WisemanKen WisemanKen Wiseman AMS Fulfillment Cal NaullsCal NaullsCal NaullsCal Naulls Community Bank Roberto BarraganRoberto BarraganRoberto BarraganRoberto Barragan Valley Economic Development Center Keith KaplanKeith KaplanKeith KaplanKeith Kaplan Westfield,LLC Tamara GurneyTamara GurneyTamara GurneyTamara Gurney Mission Valley Bank

26455 Rockwell Canyon Road, University Center, Suite 263 Santa Clarita, CA 91355

(661) 288-4400 scvedc.org

SCVEDC BOARD OF DIRECTORSSCVEDC BOARD OF DIRECTORSSCVEDC BOARD OF DIRECTORSSCVEDC BOARD OF DIRECTORS